Question
A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally
A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25% or fall by 25%. The one-year, risk-free rate is 2 percent. what is the hedge ratio, comment on hedge ratio, and what is the value of call option today?
please show calculations and answer asap
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
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